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The Story So Far – The Trouble with Traffic: Why Big Audiences Aren’t Always Profitable

January 7, 2011

The New York Times has more than 30 million online readers and weekday circulation of less than 900,000 newspapers. Yet, the print edition still accounts for more than 80 percent of the Times’ revenue.

Digital numbers are confusing when compared with traditional media metrics and are often inflated for all sorts of reasons. Users can be counted several times if they use a PC, laptop and mobile phone, to access a site. Also, many people delete their computers’ “cookies,” and because of that, they appear to be new visitors to sites rather than returning ones.

Despite this digital audiences are far greater than traditional ones which begs the question; Why do so many digital users generate so little advertising revenue?

Advertising is a numbers game but it’s two-fold. On one level more readers or viewers equals more ads and greater revenue. On another level, the amount of time a person commits to a publication, regardless of whether it is online or tradition, the more an advertiser values the audience.

In the first decade of the digital era, particularly as search engines became more powerful, publishers and broadcasters focused on building a mass audience. As a consequence, audience sizes swelled, and publishers have proclaimed that to be a success.

Unfortunately, that tactic undermined the other essential part of the advertising business—the amount of time and attention that users pay to a site. Even on the most trafficked news sites most people visit just a few times per month.

Compare that to the media of past decades where about half of U.S. newspaper readers spent more than 30 minutes reading their daily paper.

The experience of getting news on a computer or mobile device is fundamentally different from the experience in TV or print; most users tend to flit from site to site, rarely alighting for more than a brief spell.

Matt Shanahan, an analyst who is relatively new to the media world, has researched the huge gap between audience size and the level of engagement for online news outlets. He did a case study on a 90,000 circulation newspaper with a site that generates around 450,000 unique visitors a month.

Shanahan separates users into four types: The most loyal are the “fans,” who visit at least twice a week. Then there are the “regulars,” good for one or two visits a week. Sliding down the loyalty scale are “occasionals,” who stop by two or three times a month; and finally, the “fly-bys,” who come about once a month. He discovered Fans make up about 4% of the total number of visitors, and Regulars 3%. Occasionals account for 17% and Fly-bys for more than 75% of the total.
Therefore 92% of the audience visit 3 or less times per month. Despite this, Fans generate 55% of the site’s traffic.

Shanahan says, ““In the print world, a publisher’s shipment of physical media was the basis for generating revenue. In the digital world, consumption of media is the basis for revenue.. In other words, engagement is the unit of monetization.” The benefit of more engagement isn’t just in higher ad rates, but in relationships that publishers need to build with their most loyal readers – something that has been lost in the drive to attract mass audiences.

These findings are mirrored by PBS. PBS Interactive came up with their own criteria to determine PBS.org’s most loyal audience, based on the number of pages a reader views, the amount of time a reader spends on the site, and how often and how recently readers have come.

As it turned out, less than 5 percent of the visits on the site came from users who met all of PBS’s engagement standards but those people are a critical group because they stay for 13.5 minutes per visit (compared with a 3-minute average for everyone else) and click on 9 pages per visit (versus 3 for other users). These users were 38% more likely to donate money to PBS than less engaged users; they were also more prone to encourage others to use the site.

Content is also critical in user engagement and can sometimes come from unexpected areas. The Dallas Morning News discovered that a feature on their site called “High School Game Time” generated almost as many page views as the entire news section. Over the year, high school sports fans were about five times as engaged as the people coming to read news.

Social Media is also demonstrating itself to be a powerful influencer in user engagement. At Gawker Media, Google-driven traffic “is waning,” with Facebook now the top referrer, and Twitter is gaining. The concern for media outlets is readers becoming more accustomed to accessing its stories from Facebook than from their own home pages. but ultimately they can’t ignore the way people want to access content.

Vadim Lavrusik, former community manager at social media site Mashable, says that “readers who come through social are far different in their behaviors. They tend to view more articles on average and stick around the site longer.” Facebook and Twitter visitors spent 29 percent more time on Mashable.com, he said, and viewed 20 percent more pages than visitors arriving via search engines.

The argument about whether it’s more important to build large audiences or engaged audiences has not been settled. Some publishers believe that engagement only makes sense in a subscription model with evidence to suggest that that the passers-by are useful, because they are more likely than addicted users to click on ads, though whether clicks on ads are a good indicator of value is an open question.

Today, advertisers have far more choices and far more information. Moreover, many of the firms competing for ad dollars never would have been defined as “media companies” years ago. Facebook now delivers almost a quarter of all digital advertising views in the U.S. and search advertising, dominated by Google, soaks up almost half the dollars spent on online ads.

News organisations must help advertisers feel more confident that their ad dollars are being spent wisely.

The chase for traffic has put news organisations on a sugar high of fat audiences and thin revenue. It has also devalued their journalism, as they have resorted to such tactics as celebrity photo slideshows to boost search-driven traffic. As a result they have fallen short in the crucial goal of attracting engaged, loyal users. This needs to change.